How Does ES&M Minimise The Risk Of IP Theft In China?

IP protection is one of the most worrisome aspects for all companies doing business in China and EM&S is help our clients protect it.

We work on a 4 Tier Strategy:

    1. Documentation & Relationship
      Put formal documentation in place, though a good business relationship is often far more important and beneficial.
      Ensure the following documents are used and signed.

      • Non-Disclosure Agreement (NDA) though preferably a Non-disclosure, Non-use and Non-circumvention Agreement (NNN)
      • Tool Agreement – keep it simple & reference purchase orders & agreements
      • Supplier Agreement
    2.  Sourcing
      If sourcing an assembly, (rather than individual components), best practice is not to single source.

      • Use several manufacturers, ideally in different locations, with the aim of preventing companies recognizing the finished product.
      • Where possible use an assembly company to manufacture finished product, ideally one with no knowledge of your industry).
    3. Drawing Control
      You need to own and control all drawings. Although you might have day to day access to the factory’s manufacturing drawings, you still need to check them for accuracy & tolerance. Reference their ownership in the supplier agreement.
      Try not to pass design & drawing creation to the manufacturer, though sometimes it might be quicker and easier to do so. If you do, have clear statement referencing it in your formal documentation.
    4. Tool Ownership & Control
      A separate tool agreement, defining ownership of the tool and its design is required. It should also include:

      • Direct reference to purchase orders
      • Payment terms
      • Tool life
      • Inspection & Maintenance responsibilities
      • Modification & History
      • Location & Storage (this might be different when the tools are not in use)
      • How the tools are to be permanently identified

IP is a significant asset so do not lose it. If you want help to reduce IP risk ES&M can help.